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HC Verdict: Local Reservation in the Private Sector

GS Paper 2

 Syllabus: Government Policies and Intervention

 

Source: IE

 Context: The Punjab and Haryana High Court invalidated a 2020 Haryana government law that reserved 75% of private-sector jobs for state residents.

What is a Local Reservation?

Local reservation typically refers to a policy or law that reserves a certain percentage of jobs, opportunities, or benefits for individuals who are local residents of a specific region or state.

 

What did Haryana State Employment of Local Candidates Act, 2020 say?

The law mandates that companies with 10 or more employees reserve 75% of jobs paying less than Rs. 30,000 per month for candidates from the state. Employers must register eligible employees on the Labor Department’s portal.

Similar domicile job reservation laws exist in other states like Andhra Pradesh, Madhya Pradesh, and Jharkhand

 

Why did the court invalidate the law?

  • Violation of Article 16: The law violated constitutional rights by reserving 75% of private-sector jobs for Haryana residents, stating that a government cannot discriminate based on residence.
    • The Haryana government claimed authority under Article 16(4) (exceptions to Article 16) but was deemed unconstitutional by the court.
  • Violation of Article 19: The court also criticized the law for imposing excessive control on private employers, creating an “Inspector Raj,” and impairing individuals’ rights under Article 19(1)(g) of the Constitution.
    • Private jobs are skill-based and analytical, and citizens have the fundamental right to work anywhere in India

 

What does the Constitution Say? 

The Constitution of India guarantees freedom of movement and consequently employment within India through several provisions.

  • Article 14 provides for equality before the law irrespective of place of birth.
  • Article 15 guards against discrimination based on place of birth.
  • Article 16 guarantees no birthplace-based discrimination in public employment.
  • Article 19 ensures that citizens can move freely throughout the territory of India

 

 

Benefits of local reservation in the Private Sector:

ProsExplanation
Exceptions in constitution  The reservation based on domicile aligns with Article 16 of the Indian Constitution. It provides opportunities to locals, who bear negative externalities from job creation.
Equality within society Reservation in local jobs promotes equality within society, focusing on low-strata jobs, in line with the Equal Protection of Law spirit outlined in Article 14 of the Indian Constitution.
Such policies promote substantial equality, especially as public sector job opportunities are limited.
Suitable Solution for UnemploymentIn the face of unemployment and slow job creation, local job reservation is seen as a suitable solution to address these challenges.
Special Constitutional ProvisionsE.g.,  Andhra Pradesh and Telangana under Article 371 D and E. Local job reservation aligns with these constitutional provisions.
Boost Local EconomyLocal job reservation policies aim to empower local youth, discourage migration, and address agrarian crises and local unrest by reducing unemployment.
Cost Savings for CompaniesHiring local employees reduces relocation costs for companies, potentially lowering operational expenses. These cost savings may be passed on to customers through reduced prices.
Improved ProductivityLocal employees are likely more familiar with the local language, culture, and business environment, enhancing their productivity and efficiency in the workplace.
Global Practice These policies are in line with global practices where countries like the US, (The US Civil Rights Act of 1964) and Canada (The Employment Equity Act), provide reservations in private jobs.

 

Issues with the local Reservation in Private sector:

ConsExplanation
Can Trigger Exodus of InvestorsLocal job reservations may lead to an exodus of domestic and multinational investors, especially in sectors like auto and IT that rely on highly skilled manpower.
E.g., Haryana witnessed a 30% drop in investment in 2022 due to the local reservation law, impacting its ranking among states in terms of new investment projects.
Affect Existing IndustriesThe focus on the “son of the soil” and restrictions on the free movement of manpower can adversely affect existing industries in the state.
Extreme Talent CrunchImposing reservations on gig and platform companies may result in a severe talent crunch, affecting the availability of skilled individuals.
Legal IssuesIt is beyond the power of states to create domicile as a condition for employment as the constitution provides this provision for public employment and only parliament is empowered to make such laws under Article 16(3) 

 

75% reservation also goes beyond the reservation ceiling of 50%
Public Employment (Requirement as to Residence) Act, 1957 abolished Residence as a criteria for a job. Few exceptions were made for Andhra Pradesh, Manipur, Tripura, and Himachal Pradesh
Promotes Regionalism Local job reservation policies pose threats to unity in diversity, potentially creating local vs. non-local divisions.
Undermines Merite system They undermine the merit system, affect economic efficiency, and may lead to a shortage of qualified workers, impacting economic development.
Promotes Vote Bank Politics among states

 

Judicial Pronouncements:

Legal CasesKey Points
Dr Pradeep Jain v Union of India, 1984Legislation for “sons of the soil” deemed unconstitutional
Sunanda Reddy v State of Andhra Pradesh, 1995Supreme Court affirmed the unconstitutionality of a state policy giving 5% extra weightage based on the medium of instruction.
2002 Rajasthan CaseSupreme Court invalidated the appointment of government teachers in Rajasthan, which favoured applicants from specific districts or rural areas.
2019 UP-Subordinate Service Selection Commission CaseAllahabad High Court struck down a UP recruitment notification that preferred women who are “original residents” of Uttar Pradesh alone.

 

Conclusion:

What is more important for states is to focus on skill training (capacity building of Youths), economic recovery and education to provide ample job opportunities, fostering competition in the free market. While local reservations may offer short-term gains, they could hinder long-term economic development and national unity.

 

Insta Links: 

Haryana private sector quota law

  

Prelims Links:

Consider the following statements : (UPSC 2023)

Statement-I : The Supreme Court of India has held in some judgements .that the reservation policies made under Article 16(4) of the Constitution of India would be limited by Article 335 for maintenance of efficiency of administration.

Statement-II : Article 335 of the Constitution of India defmes the term ‘efficiency of administration’.

Which one of the following is correct in respect of the above statements?

 

(a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I
(b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I
(c) Statement-I is correct but Statement-II is incorrect
(d) Statement-I is incorrect but Statement-II is correct